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description

This HBR Case Study includes both the case and the commentary. For teaching purposes, this reprint is also available in two other versions: case study-only, reprint R0911X, and commentary-only, R0911Z.

When a UK insurance company is plagued with a securities fraud scandal that results in the ouster of the CEO, the head of human resources seizes the opportunity to shake up the culture with a bold replacement. But the chairman of the board is uncomfortable with that strategy, preferring to focus on candidates of a more traditional stamp. How far can - and should - the HR director go to influence the high-stakes appointment? Three experts comment on this fictional case study in R0911B and R0911Z. CIPD's Vanessa Robinson acknowledges that the HR director has painted herself into a corner by making her case to the board chairman first. To get out, she needs to gather hard data to bolster her argument and demonstrate in business terms the downsides of maintaining the status quo. Debating the relative merits of various CEO candidates is fiddling while Rome burns, says Richard Hermon-Taylor, a management consultant. The company is in jeopardy of imploding, and the search for a new CEO could take weeks or months. The board chairman must take swift action: He should form a special committee to deal with the crisis, retain independent forensic accountants and counsel, announce the appointment of an interim CEO, and develop a communications program to reassure employees, investors, and customers. Charu G. Raheja, an assistant professor of finance at Wake Forest University, warns that the HR director is treading on thin ice. As corporate monitors and advisers to top management, directors must respect one other, the chairman, and, eventually, the new CEO. If that respect is compromised, serious problems can result.